Hydrogen Hype: Balancing the Equation – Part 1

I recently read about the manner in which different people parse information, which has caused a seismic shift in my understanding of many issues: from politics, to economics and religion.

The author concludes that the majority of people “parse information through a consensus filter as a safety mechanism. They do not ask ‘is this true?’ They ask ‘will others be OK with me thinking this is true?’

This trait makes people very susceptible to perceived consensus, with many never questioning the accuracy of the consensus position.

Wanting to be an accepted part of the tribe is evolutionarily very sensible.

It improves the chance of the individual’s survival.

However, where consensus is wrong, this can be catastrophic to the survival of the species.

Fortunately, there is an in-built evolutionary mechanism to protect the tribe from universal collapse – a small percentage of people who do actually parse information through a true/false prism.

Following a recent discussion on this topic with Frans Cronje, he opened a BizNews talk with a related point – while analysts are regularly criticised for being negative (and very occasionally complimented for being positive), for us it’s never been about positive or negative, but about true or false.

While the broad strokes of the consensus versus true/false parsing of information can be seen globally, some societies seem more susceptible to the consensus view than others.

Societal consensus provides the framework of thinking, and only within that framework are consensus thinkers free to question and innovate.

For much of the western world, one of the consensuses of the day, the framework in which one can operate, is the idea that the survival of civilisations depends on reducing greenhouse gas emissions, and by extension (an actual non-sequitur) green energy is critical.

This stems from a strange alliance. Firstly, environmentalists, who came to the broad consensus about 40 years ago that global warming was happening, man-made, largely driven by greenhouse gas emissions as a result of fossil fuel use and dangerous.

In the intervening years, global warming has been refocused as climate change.

Secondly, the renewable energy lobby that embraced the idea of climate change and dovetailed it with a proposed solution: renewable energy, primarily in the form of solar and wind.

Thirdly, a facilitating lobby group, largely linked to the latter, which lobbied against the other low greenhouse gas emission energy source – the anti-nuclear lobby.

Thus came into being the framework: “The climate is changing, it is because of our use of fossil fuels and the solution is reduced greenhouse gas emissions through solar and wind energy.”

Within this framework, one can see enormous innovation and efficiency, especially from western Europe, where the framework has become most entrenched. One of the epicentres of innovation and optimisation, as well as general adoption, is Germany.

So, what of green hydrogen? Over the past half decade, green hydrogen has come into focus in a significant way in Namibia, driven largely through historical links to western Europe, particularly Germany.

Until the announcement of oil discoveries by Shell and shortly thereafter, Total, green hydrogen was painted as the country’s get-out-of-jail-free card, and post-Covid recovery plan.

While those who assess information through a true/false lens have been generally sceptical of this space, until now there has been little reason to share this scepticism publicly. However, over the past month, that has changed.

The reason? Until now, there has been little harm from the hydrogen hype (beyond the fact it has been a distraction from the real grass-roots reform needed, and it has perhaps contributed positively to Namibia from a global optics and recognition perspective.

Moreover, the space has created a few jobs, and while these are certainly not worthy of the hype that has surrounded them, in a massively job-deficient economy, every bit helps.

At the same time, some pilot activities, all subsidised by foreign governments or private companies, have established, and may add some value to the local economy over coming years, albeit on a small scale.

Moreover, for green hydrogen produced in Namibia at scale in totality, there remains an outside chance that despite the shortcomings and reservations, the industry will develop.

Thus, the benefits have likely outweighed the costs to date, and while official employment promises are absolute fiction, and the promises of enormous scale highly unlikely to materialise, the pursuit of this sector as a future focus for Namibia has been without material downside.

However, in a recent document produced by GH2Namibia titled: ‘Namibia Green Hydrogen Sector Development: Frequently Asked Questions’, a question was asked and responded to as follows: “Will government debt increase due to investments in the green hydrogen projects?”

The answer was: “Depending on the nature of the funding received/utilised, government debt may increase. If funding from donor sources is tapped into then the debt is not growing, however, when concessionary capital, backed by government guarantees are used, then the size of the debt will grow.

However, the critical factor is the cost of the debt, if the government taps into normal loan facilities at the current cost of capital, then the debt burden grows, however, when cheaper and concessionary capital sources are used, the debt burden is smaller.”

Despite the answer both dodging the question and being factually incorrect in places, a highly concerning change was seen – the answer was not a resounding no.

Thus, it seems the sentiment is now shifting from “we will use donor funds” to “we might use Namibian taxpayers funds” to develop this industry, be these the tax funds of today or tomorrow’s taxpayers.

This is deeply concerning, and thus it is now time to raise alarm bells.

• Rowland Brown is the co founder of Cirrus Capital.